Ukraine Clash Kills Three as Powers Meet for Crisis Talks

A pro-Russian militant holds a molotov cocktail at the gates to a National Guard base, blocked by trucks in Mariupol. Photographer: Nikolai Ryabchenko/AP

April 17 (Bloomberg) -- Ukrainian forces killed three pro-Russian militants after an attack on a national guard base in
the country’s east as the U.S. and its European allies sat down
with Ukraine and Russia to discuss the crisis.

Police also wounded 13 fighters after about 300 fired on
guards and threw Molotov cocktails in the southeast Ukrainian
city of Mariupol overnight, Interior Minister Arsen Avakov said
on Facebook. Russian President Vladimir Putin rejected claims
from Ukraine that he’d deployed troops there and said he would
fight to defend compatriots in other countries.

“We definitely know that we should do everything to help
these people defend their rights and define their destiny,”
Putin said in a televised question-and-answer session in Moscow
today. “We will fight for this. The Federation Council gave the
president the right to use military force in Ukraine. I hope
very much, that I don’t have to use this right.”

The violence preceded a meeting of top diplomats from the
U.S. the European Union, Ukraine and Russia in Geneva today. The
U.S. and its European allies accuse Putin of stoking the unrest
and have threatened to ratchet up sanctions on their former Cold
War enemy if his government doesn’t take steps to calm the
situation and withdraw what NATO estimates are 40,000 Russian
troops massed on Ukraine’s border.

Sanctions Threat

Ukraine deployed special forces and helicopters in the
Mariupol operation. They detained 63 people and captured weapons
and phones serviced by Russian mobile providers, Avakov said. No
police were injured.

The Geneva meeting will allow the U.S. to test whether
Russia is serious about a diplomatic resolution to the crisis,
said a State Department official, who spoke on condition of
anonymity in advance of the talks. If not, U.S. officials have
said they may deepen measures against Putin’s inner circle and
possibly Russian industries ranging from energy to banking.

U.S. President Barack Obama said Putin’s government was
supporting “at minimum, non-state militias” in its neighbor.

“Putin’s decisions are not just bad for Ukraine, over the
long term they’re going to be bad for Russia,” Obama said in an
interview with CBS News aired last night.

Visa bans and asset freezes imposed on individuals by the
U.S. and EU already have had an impact. Russia’s Micex Index of
equities has lost 12 percent this year.

Putin Speech

The unrest also has hurt Ukrainian asset prices. The
hryvnia is the world’s worst performer against the dollar this
year among more than 100 currencies tracked by Bloomberg, with a
27 percent loss. It surged for a second day yesterday after an
emergency interest-rate increase, gaining 5.3 percent to 11.3
per dollar.

Putin said allegations that Russian forces were operating
in Ukraine were “nonsense” and he annexed the Black Sea
province Crimea last month because Russian speakers were facing
“real threats.” The east and south of Ukraine were
historically parts of Russia, and the former Soviet republic has
suffered an anti-constitutional revolution, Putin said, adding
that Russia was obliged to respond when its former Soviet-era
enemy NATO moved closer to its borders.

Stalled Advance

Ukraine’s government in Kiev sent troops to regain control
of buildings that the government said are occupied by armed
“extremists” operating under Russian orders in its eastern
Donetsk region this week. They retook an airfield near
Kramatorsk two days ago in an offensive that stalled yesterday
when pro-Russian activists seized armored vehicles and disarmed
a number of soldiers.

“The guys don’t want any escalation,” one of the activist
leaders, Vadim Chernyakov, told reporters. “They had an order
to come to Kramatorsk. They should be praised for the fact that
they didn’t use weapons against the people.”

Ukrainian authorities also started criminal proceedings
against Russian lender OAO Sberbank, “which is suspected of
financing terrorism,” Ukraine’s acting Prosecutor-General Oleh
Makhnitskyi said on Channel 5 television late yesterday.

Sberbank spokesman Alexander Baziyan didn’t answer his
phone, and the press service didn’t immediately respond to an e-mailed request for comment. Fourteen banks are being
investigated for supporting separatism, and 300 criminal cases
have been transferred to courts, Makhnitskyi said.

NATO Defense

With tensions rising and nearby countries such as the
Baltic nations worrying about security, the North Atlantic
Treaty Organization vowed to beef up defenses and upgrade
contingency plans.

“We will have more planes in the air, more ships on the
water and more readiness on the land,” Secretary General Anders
Fogh Rasmussen said yesterday in Brussels after the 28 NATO
allies approved the changes.

Obama said NATO will stand by its member countries and that
Putin knows that U.S. and allied forces are “significantly
superior” to Russia’s.

“They’re not interested in any kind of military
confrontation with us,” he said in the CBS interview.

The Geneva meeting of foreign ministers will bring together
Ukraine’s Andriy Deshchytsia and Russia’s Sergei Lavrov as well
as John Kerry of the U.S. and Catherine Ashton, the EU’s foreign
policy chief.

The outcome depends on “whether the Russians come prepared
to try to defuse the crisis,” said Steven Pifer, a former U.S.
ambassador to Ukraine.

Crisis Culmination

Fyodor Lukyanov, head of the Council on Foreign and Defense
Policy in Moscow, said “the Ukrainian crisis is getting closer
to its culmination, when the last chance to rescue the situation
is highly professional diplomacy.”

The deal needs to include rights for all Ukrainians,
guarantees on Russian gas prices for Ukraine and gas transit to
Europe, a nonaligned status for the country and Russia’s
recognition of the May 25 presidential elections, Lukyanov said
in a commentary in the government daily Rossiiskaya Gazeta.

Ukraine, the U.S. and the EU will make the case that
Russian calls for decentralization and the rights of Russian
speakers inside Ukraine can be resolved constitutionally, the
U.S. State Department official said.

While the other parties to the talks won’t accept Russia’s
contention that Ukraine’s regions have the right to secede --
and even be annexed by Russia, as Crimea was last month -- the
Ukrainians have conceded that their political structure is “too
centralized,” said Pifer, a senior fellow at the Brookings
Institution, a research organization in Washington.

Putin says Russia has the right to protect Russian speakers
in Ukraine who are at risk of attack by “anti-Semites and neo-Nazis.” The Kiev government says Ukraine’s Russian-speaking
population isn’t at risk, and the United Nations human rights
office said on April 15 that it found no evidence of
“widespread nor systemic” persecution of Ukraine’s ethnic
Russians.